BUDGETARY BLUES

I’ve written before how most people wrap themselves in a warm, velvety blanket of self-deception, or delusion, in order to smoothen out the jagged edges of harsh reality that often exists in their lives. I’ve written about how this delusion has led so many into literally taking the bible at face value as the word of God. Despite all the ridiculous contradictions and mythologies embedded in both the old and new testaments. About how people are still searching mountain tops in Turkey looking for the remnants of Noah’s Ark, in spite of the implausibility of such a fable. About how poll-after-poll shows that less than half the people in the U.S. believe in Darwin’s Evolution. Even though one visit to a museum of natural history in any major city would show them overwhelming proof of Evolution’s existence. So too, does this blanket of self-deception spill over into the political arena. This came to mind with the recent death of Briton’s Margaret Thatcher and the cozy relationship she had with our Ronald Reagan when he was President.

Much has been written about about the “iron lady” as she was called; but all these words seldom gave a full picture of her administration. At the time she became Prime Minister in 1979, England had gone pretty far down the path of democratic socialism. The British government had nationalized large, entire industries such as coal-mining, steel production, airlines, shipping and telecommunications; and was doing a very poor job running their operations. The unions had become all-powerful, and had begun a series of crippling labor strikes that was grinding the economy into the dust. Thatcher’s achievement was to get the government out of the business of operating major industries (which it was doing so badly), and to break the back of the trade union’s stranglehold on the economy. For those accomplishments she was either praised or demonized, according to one’s political beliefs, by major segments of the British population. But in trying to paint Thatcher as a dyed-in-the-wool conservative, few columnists have pointed out that she was also a stout defender of the British universal healthcare system. She had no tolerance for anyone attempting to minimize or cut their benefits.

The media also failed to recognize how proud Maggie was for securing the largest single year payment increase since the end of WWII (about 11%) in Briton’s old-age pension system (our Social Security system.) Or how, for the first 10 of her 11 year-reign, the marginal tax rate on the wealthy was 60 percent. In her last year, that rate was reduced to 40%, still a tick higher than what the Democrats have been able to achieve in this country. Because the reality is, that Conservatives in England, and indeed, throughout all of Europe, are still more liberal than Democrats in this country. Every first-world country, including all of Europe, has universal healthcare except the U.S. And it usually extends to such lesser things as post-natal care. For example, in France, when a mother gives birth, a nurse is sent to her home for several days after, to help in her recuperation. So while Margret Thatcher and Ronald Reagan did have a special relationship, they were often miles apart in their accomplishments.

According to propaganda, fable and mythology put forth by Republicans in this country, Ronald Reagan was the great conservative that slashed government spending to the bone. Nothing could be further from the truth. Here’s where those pesky little things like facts come into play. (They always seem to ruin a nifty delusion, don’t they?) For 39 presidential administrations covering more than 200 hundred years, the accumulated budget deficit in this country amounted to a little over $900 billion. Under 8 years of Reaganomics, the budget deficit mushroomed to $2.8 trillion. I’m not a mathematician, but it seems to me that Reagan accomplished more than a 300% increase in our deficit spending during his 2 terms in office. How did he achieve this magnificent accomplishment? In 2 ways. First, while he did cut some fringe social spending around the edges, he vastly increased military spending. You know, to stick it to the “evil empire” as he called it, or the old USSR. And secondly, he sharply reduced tax rates, especially for the rich, whose marginal rate went from 60% down to 28%. Of course, this, in turn, sharply reduced the amount of revenue the government was able to take in.

Right-wingers and Republicans (is there really a difference between the two) like to pretend that, somehow, the Department of Defense is not subject to the same budgetary constraints the rest of the government has to deal with. That Defense really gets its funding from the money-tree that grows in the Pentagon court-yard. Indeed, in this past election, while Mitt Romney was castigating President Obama for huge budget deficits, and promising to balance the budget if elected, he went on about how Defense was so under-funded. He promised to significantly increase Navy ships, and fighter jets, and ground troops, etc. But those things don’t come cheap. If those promises were implemented, they would increase the $700 billion existing Defense budget by another $100-$200 billion annually. But he would somehow still balance the total federal budget. Must be that getting resources from the money-tree thingy again.

The fact was that Reagan really didn’t care about the ballooning federal deficit, as long as he got his way on vastly increasing Defense expenditures. He’s given credit for significantly improving the ailing economy he inherited when taking office. But it was a completely different set of circumstances in 1981 versus today. Back then, there were raging inflationary pressures throughout the economy, versus very low inflation and interest rates today. Inflationary pressures didn’t begin to come under control until Paul Volker, then head of the Federal Reserve System, began raising interest rates to astronomical levels. This cooled off wild spending impulses, and sucked some of the excess dollars out of the economy. As inflation became tamed, the economy started to significantly improve. But most of the credit for that should be given to Paul Volker.

Today, in the 25 years since Reagan left office, the federal deficit has grown from $2.8 to almost $17 trillion. Certainly not a good thing. The GOP likes to blame a big chunk of the increase on too much spending by the Obama administration. But the fact is, spending has become almost static in the last several years. The most prominent reason for huge budget deficits in the lack of revenue taken in by the government. Part of that is due to the recession and the high rate of unemployment we’ve experienced. But part is also due to the low rate of taxation that currently exists and that was put in motion by Ronald Reagan. We are currently number 31 on the list of taxes collected by the world’s nations. Virtually every country in Europe and the Americas has a higher rate of tax collection than we have.

I call it the free-lunch-syndrome, so craftily exploited by Ronald Reagan. You want a strong national defense? You want a vast array of social, crime-fighting, and other government programs? Fine. We’ll give you all of that. And the best part, we’ll hardly charge you for any of this. After-all, who doesn’t like a free lunch. So now, this has resulted in the ultimate dysfunction as far governance is concerned. Republicans are vowing no more tax increases, despite the fact that we are so obviously under taxed; and Democrats are vowing no further cuts or reforms of social programs, even as they become more and more costly. Maybe, the first step toward sanity in governance, would be to dispel all the delusions and mythologies surrounding past history’s prominent figures. Maybe infusing those that would govern, with a strong dose of reality and rationality would finally put us on the path toward resolving some of these issues.